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by Harald Schumann
Monday, Dec. 05, 2016 at 4:29 AM
Growing inequality is the greatest political problem of our time. Governments are often only actors or puppets of an anonymous regime for the benefit of the privileged where the interests of simple people do not count.
DEMOCRACY AND THE UNCANNY POWER OF MONEY
By Harald Schumann
[This keynote of the investigative journalist Harald Schumann at the "Power, Money and Politics" congress in Bielefeld, 10/1/2016 is translated abridged from the German on the Internet, http://verteilungsfrage.org.]
In 2015, the relief organization Oxfam published an amazing statistic. The richest 62 earthlings had a wealth of .76 trillion. That is as much as half of humanity, more than 3.6 billion people.
As in previous years, this list caused a great noise in the media and called many critics into action. The data is incorrect and the calculation is wrong, they wrote, and all this is not even relevant, it was said everywhere. Finally, the number of people living in absolute poverty was in decline for a long while. After a few days, the theme disappeared again from public perception as though it was a natural phenomenon and not really important.
GROWING INEQUALITY AS THE GREATEST POLITICAL PROBLEM OF OUR TIME
An unparalleled concentration of wealth occurred for around three decades.
Still, that is only a dumb error. Whether 62 or 80 or 300 billionaires have this amount, a concentration of wealth has been underway for three decades that never happened before on this scale.
No, I don't think immoral rich persons are living it up while everyone else has to work hard to secure their existence. How many yachts, villas and luxury cars someone has or whether he travels around the world in a private jet doesn't matter to me.
The billions bestowed on a small elite of the super-rich and their money companies give them a hardly controllable power.
A very different picture is critical. Banks and insurances use this power to ruthlessly protect their interests at any price. As a result, all governance, even in the strongest democracies, decays to a mere spectacle of powerlessness.
Many citizens feel this. They know one thing even if they often do not recognize the connections. Their governments are often only actors or puppets of an anonymous regime for the benefit of the privileged where the interests of simple people do not count. The more they are annoyed about this and feel shaken and underprivileged, the more they follow the dangerous promised salvation of unscrupulous populists.
I know you are now thinking, this is a conspiracy theoretician. However, that is completely exaggerated. I really wish that were true. But the evidence is overwhelming.
EXAMPLE: TAX HAVENS
The fact that tax havens exist is a surefire sign that a global hierarchy is at work.
The rich and powerful maintain a global system of shadow finance.
In April 2016, colleagues of the Sueddeutschen Zeitung newspaper and 370 journalists in 80 countries published a flood of evidence. The Panama Papers revealed that the rich and powerful maintain a global system of shadow finance enabling them to keep their wealth and black money hidden from the authorities of their homelands to escape taxes and criminal prosecution. In Germany, 28 banks are demonstrably involved in the dirty business. More than 1000 German citizens used the services of the Panama office of Mossack Fonseca to set up their dummy firms. This legal office is only one of many with this service.
Taking out the trash was a brilliant journalistic achievement. However, this scoop, as it is called in our branch, is misleading. The reports made people believe the main responsibility for the organized tax evasion lies with a criminal law office in distant Panama and its corrupt government. But that is not true.
TAX HAVENS ONLY EXIST BECAUSE THE GOVERNMENTS OF AFFLUENT COUNTRIES LIKE GERMANY LET THEM GET AWAY WITH IT
Tax havens like Panama, the Cayman Islands, the Virgin Islands, the Dutch-Antilleans, Hong Kong, Singapore and others only persist because the governments look away. I have been writing about this theme for 22 years and it is always the same story. States offer rich foreigners a hiding place in the form of mailbox firms to book their black money and evade taxes. The tax authorities and criminal prosecutors of their homelands are powerless to take action against them.
THOUSANDS OF EMPLOYEES OF BIG AUDITING COMPANIES WORK IN THE SHADOW FINANCE CENTERS. THUS THE GOATS ARE THE GARDENERS
This is formally prohibited nearly everywhere. In Germany, for example, banks for a long time did not manage any accounts for firms if they did not know their true owners. However, this prohibition is hardly observed. The Baffin board of control let this happen through the big regulators KPMG and Price Waterhouse who are deeply entangled in the business. Thousands of their colleagues work in the shadow finance centers.
THE RESPONSIBLE MANAGERS LIVE IN TOTAL IMPUNITY
Ridiculous fines threaten the respective bank when something is revealed as with the Panama Papers. Do you know the highest fine for violating the money-laundering law in Germany was 51,000 euros? That is even less than the charge for black money service and is not only true in Germany.
More than trillion is stashed in tax havens worldwide today. That is a number with twelve zeros. Calculated very cautiously, this costs the state treasuries of the world more than 200 billion euros in annual revenues, twice as much as all development assistance payments.
THE TAX FLIGHT CENTERS ARE EX-TERRITORIAL ZONES IN THE DATA MEMORY OF THE BIG BANKS
This is all absurd. If the political will to end this nonsense existed in the US or in the eurozone, this could be ended overnight. The parliaments only need to resolve that banks engaged with tax flight sites cannot have any accounts with the European Central bank or the Federal Reserve or trade in euros or dollars. All international banks would immediately stop this business and the nightmare would be over. The late German chancellor Helmut Schmidt made this proposal 10 years ago.
CLOSE PERSONAL TIES BETWEEN BANK MONITORS AND BANKERS
EXAMPLE: FINANCIAL MARKET REGULATION
The relations of politics with the financial industry, the big banks, insurances and funds cast a light on the hidden power of the money elite. Its goal is multiplying the money of their clients, shareholders and top managers. Oxfam reported about this wealth elite. In this function, they pressed for decades for the abolition of all those rules with which the reformers of the postwar era put the financial branch in chains to help the rest of the economy.
This began in 1973 with abolishing controls on the international turnover of capital and then flowed from 2000 into a system that elevated organized fraud with worthless securities and falsified credit-ratings into a legal business.
GIGANTIC COSTS AND MINIMAL CONSEQUENCES
Eight years ago, the money managers went completely out of control and plunged the world economy into the worst recession since 1930. Millions upon millions of people around the world lost their jobs. Experts estimated the economic damages from lost economic output at more than trillion for the United States alone. That is 10 thousand times 1000 million. The damage is presumably even higher in Europe. The bank bailout in Germany alone will cost more than 60 billion euros at the end. That is as much as all German schools cost annually. Today, eight years after the crash, the economic output of the eurozone has finally reached the 2008 level.
That should be a sufficient reason to radically reform the financial branch to prevent a repetition of this catastrophe. No one less than Chancellor Merkel summarized the central maxim of this re-regulation in September 2009:
"Never again may a bank be so big that it can extort states. That is the most important point."
However, nothing has happened in this most important point up to today. Bills to break up system-endangering financial companies were not even presented. Reforms that separated the risk business with securities from the conventional deposit- and credit-business were so watered down that they would bring nothing but additional bureaucratic expense.
THE SYSTEM-BANKS AND INSURANCES WITH ACCESS TO THE STATE TREASURY IN CASE OF CRISIS ARE EVEN LARGER AND MORE POWERFUL TODAY THAN IN 2008
The most important point of the chancellor was not even tackled.
TREMENDOUS LOBBY POWER STANDS BEHIND THIS
In Brussels alone, the financial industry employs 1700 lobbyists. There are four lobbyists for every EU official occupied with these themes. This costs the financial industry around 120 million a year, 30 times as much as all the unions, consumer- and environmental organizations spend for their lobbying on this theme in Brussels.
The logic behind this expensive personnel cost is very simple, one of the actors explained to me. Effectively limiting the risks in the financial branch could quickly cost several hundred million euros annually in profits. Spending many millions for lawyers, advisors and agencies is always worthwhile, pouring sand into every moving part. Delaying reforms, even if this only succeeds temporarily, is always worth doing.
Promising a few investments can be enough to create a blocking minority in the Council of Ministers. Organizing a blocking minority in the EU Council of Ministers is one of the most important tricks. The governments of smaller and poorer EU states are susceptible to that. Obviously, a direct connection can never be proven. There is nothing in writing…
MANIPULATION OF PUBLIC OPINION IS A MORE SERIOUS PROBLEM
This direct influence on legislation demonstrates their concentrated uncontrolled power. But that is only the smaller part of the problem. The trustees of the top 0.1% steer our perception and public opinion so their interests are always guaranteed. As a result, our governments carry out policies that continuously intensify the social division of society.
The reintroduction of nobility privilege in Germany, the transfer of wealth and power through dynastic succession is an excellent example.
Yes, I know that sounds crazy. But unfortunately, it isn't. Rather the most concerted PR- and lobby campaign of all time is staged. Its keyword is a family enterprise.
LOBBY CAMPAIGN AGAINST THE INHERITANCE TAX
The story began in 2002 when the Brun-Hagen law office in Munich started up, a so-called "family business foundation." However, the name is misleading… The composition of the board of trustees is revealing. The owners of big businesses are represented, the Quandts, Hamels, Henkel and other German oligarch families.
A fairytale was changed into a generally acknowledged fact in hundreds of events, sponsoring of researchers and universities, the involvement of top-flight advisory councils and so-called media partners like Sueddeutschen Zeitung and Welt newspapers, namely the narrative that Germany's family businesses would be ruined and jobs destroyed by imposing inheritance taxes.
The top one percent of businesses has four-fifths of the total wealth.
Up to today, the government, the family business foundation and the economists paid by them have not named a single business that went bankrupt because of the inheritance tax… Since time immemorial, tax payment could be apportioned up to ten years or avoided.
HAS THE POLITICAL CLASS IN EUROPE CAPITULATED TO CORPORATIONS, BANKS AND THE SUPER-RICH?
The inheritance tax is only one case of many. The same thing happens in practically all political fields that touch the interests of the wealthy – from the care of the environment to the weapons industry.
This demonstrates the great power of this far-reaching network of the rich. All the actors ignore the obvious. The emperor is naked but no one dares say this. The fairytale of threatened family businesses even survived the decision of the German Constitutional Court that declared the whole thing unconstitutional because equals were treated unequally. For two years, the German Federal government concocted a reform and the result is absurd. Tax revenue will probably fall again and the reform is certainly unconstitutional.
In the future, whole companies worth billions will be inherited tax-free along with enormous power. We should not be fooled. Whoever has nearly unlimited funds can exert great influence on politics in our democratic society.
The central question is: why does this function so well? Why doesn't any politician dare to oppose this? To a hard-boiled liberal, a progressive inheritance tax on the great wealth of over a million would be an indispensable contribution to equal opportunities in society. This is ultimately one of the central promises of our social democracy.
Corporations, banks, and the super-rich have investments and funds to create the right social climate.
My hypothesis is that I would like to be proven wrong. The whole political class in Europe including the Greens and a part of Die Linke (the German Left party) has basically capitulated. They know corporations, banks and the super-rich with their investments decide over the future or failure of their states, territories, and local communities. They understand that the wealthy and their trustees in powerful positions of big businesses can substantially influence public opinion.
MANIPULATION OF JOURNALISTS AND MEDIA
Manipulating journalists and the media is the simplest and very effective method. For example, an endless stream of statements on a certain theme can be created through studies, foundations, think tanks, congresses and all kinds of events. For the average stressed out journalists in the newsroom of a newspaper or broadcast station, it seems many different sources make the same statement. Why should other voices be sought? One statement is repeated. The trend and the history are finished.
Bright social scientists have even developed their own instrument for measuring what stands out in the media: the "discourse network analysis." This software evaluates the media regarding the actors and their interactions and visualizes the result. With this software, we can see how many sources tend to one statement, how frequently they are cited and what clusters exist…
MUTUAL INSTRUMENTALIZATION OF LOBBYISTS AND POLITICIANS
The mutual instrumentalization of lobbyists and politicians is another current method. Good lobbyists have access to enormous resources and can organize studies, information and above all television appearances that affect voters. This helps their position in the party. In a countermove, one law or another can be quietly waved through. Does this serve the economy and citizens at all?
IS THE STATE A MERE SERVICE PROVIDER FOR BUSINESSES?
This is the hard core of the problem. In their self-image, most governing politicians see themselves as promoters of the economy. What is good for businesses creates growth, jobs, and satisfied voters. Everything else is secondary. Everyone is subject to this principle, from the chancellor to small town mayors. A fatal understanding of the state as a mere service provider for businesses usually goes along with this.
The influence of money in politics is so great because politicians of every color are no longer ready for conflict regarding capital as soon as they come into government. This assumption penetrates the whole social system. This is the real cause for the unbroken cultural hegemony of neoliberalism despite the super-crash and growing social division…
THE REVOLVING DOOR EFFECT
One central element of this malformation is the mutual personnel penetration of corporations and states, the so-called revolving door effect. The state is only subject to the logic of businesses that are obligated to their owners and managers and not to the general public…
The most spectacular case in recent times is the new job of the former president of the European Commission, Durao Barroso, as a high-paid lobbyist for the financial company Goldman Sachs…
DEMOCRACIES FALL INTO A DOWNWARD SPIRAL
What is terrible in this clumsy fraternity of the highest public servants with the financially powerful is the damage of democracy and not only the manipulation of legislation for the benefit of private interests.
The Barrosos, Schroeders and Draghis give the false impression that all politicians are for sale. This changing of sides driven by greed for power and the eternal squinting after the good will of the economically powerful drives our democracies in a downward spiral.
The more politics only serves the privileged, the more people do not vote, particularly the less educated and poorly paid. This makes a politics for losers and the weak hardly interesting for politicians since their effort is not reflected any more in votes. As a result, the parliaments of representative democracy are increasingly less representative. The interests of simple people are no longer mirrored in legislation.
For decades, we only knew this phenomenon from the US but now we confront it directly. In the 2013 Bundestag election, the voter turnout in precincts with high unemployment and high poverty was around a third less than in wealthier quarters. At the same time, the parliaments have largely turned away from this lower third of society… Since the 1990s, legislation in Germany has served the interests of the better-off part of the population.
DOES THE RISE OF NEO-NATIONALISTS AND RACISTS SERVE AS AN ALARM CALL?
Neo-nationalists and racists unscrupulously exploit the rage and fears of the losers and promise salvation with the return to a world of yesterday even if this brings on decline and war.
While dreadful, the rise of right-wing populists also has a good side. This rise has frightened the financially powerful all over the world… The Brexit vote is interpreted as "part of a greater global revolt against the establishment, the growing inequality and globalization." In the past, the masters of the universe did not care about distribution questions. At a recent meeting in China, the governments of the 20 largest economic nations declared "the advantages of economic growth must be distributed more widely to promote inclusion…"
Obviously, these are only empty words. But this sudden fear of the money-elites may also be a chance for a timely change of course before the abyss. Perhaps these warning voices will be heard.
But very honestly, I don't know whether this will succeed on time. I certainly do not have a magical answer, a magic recipe or panacea.
I am very certain of one thing. If the democratic parties, social movements and civil society forces in Europe continue as in the past, they come to nothing. Then it will only be a question of time until figures like Marine LePen come to power in one of Europe's core countries who pave the way to inhumanity and then like the Nazis come to an arrangement with the economically powerful forces to establish an authoritarian regime.
DEMOCRATIC CIVIL SOCIETY MUST BE ORGANIZED ALL OVER EUROPE
…With the movement against the TTIP agreement, we checkmated the worst opponent for a brief moment. A first model arose in the movement against TTIP. Since the heyday of the peace movement, there has not been such a powerful sign of life of democracy from below: three-and-a-half million signatures against TTIP and more than 300,000 people at the latest anti-TTIP demonstrations in Germany.
The motive of the anti-TTIP protests is very democratic. Most presumably do not know exactly what "regulatory cooperation" or arbitration courts for investors mean. But they understand a shift of power from the parliaments to anonymous transnational groups threatens to diminish the influence of voters again. Maybe I am an incurable romantic but I still believe the large majority of our fellow citizens are democrats in their hearts. My hope is that this democracy may not be perverted again.
Nevertheless the fact is no really powerful movement has coalesced from all the hopeful beginnings and initiatives against the seizure of power of the neo-feudal money elite. For a successful defense of democracy, the many fighting organizations and groups must cooperate across Europe more closely than in the past.
Capital, to use an old-fashioned expression, is perfectly organized on the European plane and has unlimited power. While the defenders of democracy will never match this, they could make fools of their adversary in the public, on the streets, on the net and in the media – assuming they pull together and find common ground.
FOR A COMMON RESEARCHER POOL OF EUROPEAN CIVIL SOCIETY
Building a pool of researchers with many organizations from Greenpeace, Human Rights Watch and the European Union Alliance to Pro-Asyl could be a first step. A staff of experienced researchers could compile all the facts on strategically important themes. This staff could be mobilized across Europe on this basis. The civil society needs European teeth to grow into a democracy movement.
In Washington, the Center for Public Integrity exercises this function a little but not enough. Still, the idea is good. I hope we can build a European Center for Public Integrity to overcome the extreme splintering with all the small-minded organization egoisms. Such a common center could help deal with the scruples of many NGO activists in "naming and blaming" those people who work in the institutions on whose financial support they depend.
TRANSPARENCY RULES, WAITING LISTS AND LEGAL REMEDIES
To make this concrete, the names and deeds of the lobbyists should be published on a common European portal with photographs. Agreeing with corporate interests must become a risk for personal reputations. Transparency rules could make impossible another Barroso or Schroeder. I want to know who, when and where collaboration occurs on what bill.
To what extent did the saboteurs of democracy shoot with their own weapons? Ways and means must be found to prosecute the unacceptable influence of the economically powerful. Yes, judges decide all too often for the economically powerful. Nevertheless, the German Basic Law and the EU Charter are strong instruments. The verdicts of the European Court of Justice against Facebook & Co in the matter of data protection were very promising.
THE RIGHT PEOPLE ARE NEEDED IN THE PARLIAMENTS
Now comes the hardest part. Restoring public opinion is urgently necessary but not sufficient. At the end, there must be enough people in parliaments and governments who bring the necessary measures into the public arena and breakthrough.
Whoever really wants to change anything must be more than a party member. Conversely, parties that want to change something must let in these people…
Oh, parties! Haggling over bills, rotten compromises in backrooms and vain narcissists who stand before cameras and emit word trash can be overcome like prejudices and structural dystopia.
The adversities of the political carnival must be tackled. When only careerists and opportunists appear in the parties, we should not be surprised we are governed by careerists and opportunists.
We must find ways and means that ardent capable people emerge in the parliaments and defend our democratic rights. In the German Bundestag, the European Parliament and hopefully even in the state parliaments, how can we help the sharpest weapon of democracy breakthrough again and again: transparency and public opinion for the key questions? Cui bono? Who benefits? Where does the money flow?
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